Could you tell me more about that navigation controls? I imagine it's easy to make buttons to go 10 words forward/back, to previous/next paragraph and previous/next chapter. Do you want to also have a regular window with scrollbar to show all the text, where you could find the right spot and click on a word to start speedreading from?
As said, make it sentences, not x words. Colons and semicolons could also be points to stop at.
But, yes, I would like a more or less regular display too, for searching something you just read and being able to look at a sentence for a moment if you want to think about it.
I would just feed the text to LaTeX and display the result (don't know how fast that is, but for only a few sentences I think it should be fast enough to do on the fly and LaTeX is just beautiful. You could also use it to render the individual words).
Maybe 5 lines (of, ideally, average book length, I've forgotten the exact number, but there is a length which is considered to be ideal for books. Probably that should be default value, but it should also be configurable for when you want a larger font size or have a small screen), filled with as many full sentences as possible before and including the one you were at.
The rest of the screen filled with as many of the following sentences as there is room for, as long as that's less than or equal to 5 lines. Once it's more than 5 lines, it should also include more of the previous sentences to make it more or less symmetric.
Highlight the position the reader was at before switching modes (if you use LaTeX that's just a question of inserting some tag around the current word in the text you feed to LaTeX. Don't know it's name right now).
I think by using LaTeX that should be possible without /too/ much work (but some fiddling around with LaTeX sources if you don't use to write LaTeX). Just hope it's fast enough as that isn't its purpose.
If you use LaTeX but aren't used to it feel free to ask me to supply you with source code for anything you need type set (and then rendered). I'm no pro either, but having used it a few times I'm starting to know where to look stuff up and how to do some easy stuff.
(a while ago I've written a script which turns LaTeX sources directly into .png files... being a script it would probably be too slow to use as a renderer for a program, but you could do something similar:
https://gist.github.com/TT44bb/4518131)